Ted Simons:
Good evening and welcome to "Horizon." I'm Ted Simons. Joining me tonight -- Mary K. Reinhart of "The Arizona Guardian," Howard Fischer of Capitol Media Services, and Jim Small of "The Arizona Capitol Times". The governor signed a package of budget bills. Mary Kay, let's go over the rough facts. Over a billion for F.Y. '10 and ‘11 correct.

Mary K. Reinhart:
In cuts?

Ted Simons:
Yes.

Mary K. Reinhart:
In spending cuts?

Ted Simons:
Yes.

Mary K. Reinhart:
Correct, to bridge, and we're talking about $1.5 billion in total of between the two budgets up to voters and we'll get to that later. We've got with the sales tax in May and two items in November that we're going ask voters to repeal programs they put in the place. And voters are in the driver's seat.

Ted Simons:
Health insurance, 350 some odd adults and kids gone.

Mary K. Reinhart:
As it stands right now. That rolls back AHCCCS to levels we saw prior with the 204 approval. The caveat is we think that congress is very near approving what's called an extension in that -- in the amount of money they give us to fund AHCCCS. If they extend, that we're going to be ok, through June 30th, so we wouldn't see that rollback take place January 1st, as it is now. This is separate from the healthcare bill. They're ready to approve that extended federal match that we've enjoyed under the federal stimulus program.

Howard Fischer:
The budget is built, so if the money comes flew; they don't have to take it, with some change. Now, of course, as Mary Kay points out, that buys us six months more. Gets us up to June 30th of next year. Meanwhile, they're debating that healthcare package; if we can hang in there to 2014, they'll give us money. But the problem, its economy isn't going to turn around by 2014, but if we can't afford our share, we'll still lose people off the program.

Mary K. Reinhart:
Tens of thousands of mentally ill and parks closures unless the cities get together and keep those open as it looks like they're going to.

Ted Simons:
Jim, it sounds as though there will be closures you but they'll be some because municipalities are kicking in?

Jim Small:
In rural Arizona, you've got the state parks and they're the economic lifeblood of some of these towns. Lake Havasu state park on the lake. Its spring break right now and we're seeing what one of the main driving factors of their economy is happening right now. If that park closes, that could put people on the other side of the border into Nevada and, you know, so Lake Havasu would be an instance where they have a vested interest in ponying up the money to keep it open.

Howard Fischer:
Havasu at least makes money. A bunch of folks, spring break, let's get drunk. Places like Tonto, the Reardon house in Flagstaff, which is a state park that loses money because it's expensive to run and small visitors but it's enough that the cities are stepping up and some volunteer societies are stepping up to say we'll absorb the cost at least for one year, perhaps options beyond. It's not a long-term solution. There's a long-term solution sitting in the house appropriations committee and that's to tack on $9 on to --

Ted Simons:
How much strength has that got right now.

Howard Fischer:
It's not gone. Because the chairman is sitting on it. He says he's willing to do an alternate plan which makes it voluntary. But if you get a vehicle registration fee, check here, that doesn't raise nearly as much money.

Ted Simons:
Conserving open space and first things first for kids and these things, the idea being to go to the voters and ask them, as you referred to earlier, you make the decision. There's a -- as you mentioned, there's a lot left to voters as far as decisions here.

Mary K. Reinhart:
It's about $450 million and those will be on the ballot in November. And not a lot of preserving of open spaces going on right now. There's money, about $125 million. First things first, is it an active story. There was a lot of concern and consternation about that vote -- to do away with the program that voters approved in 2006 and increases tobacco tax by 80-cents a pack and provides programs for early childhood healthcare and transportation and get kids ready for school. Now, there's some talk about replacing what they just approved on Tuesday, the straight repeal, which would dump the money into the general fund. With putting a loan on the ballot, which first things first has offered. A no-interest loan, give you the $350 million if you just keep the program together. That has to go to the voters. The other option, some lawmakers are talking about dedicating the money to things like kids' care. Children who no longer will have health insurance, programs dedicated to the same types of things, childcare and healthcare. That could be funded through that pot of money.

Howard Fischer:
If you tell voters, look, you approved $150 million a year for specific early childhood programs and we want to keep that tax but use it for -- trust us that goes down. If you tell them, look, we're going to replace some of the programs that would otherwise not happen, like kids' care and AHCCCS and restoring funding for full-day kindergarten, that's an easier sell.

Ted Simons:
If you target that, is it going to have been enough to get it on the ballot?

Jim Small:
I think there would be a buy-in from the first things first people, if they were going to amend the ballot proposition. If he come up with a solution that the first things first people support, then you go a long way with it. I don't think even legislators are confident it's going to pass. I think they think the money it is coming out of the budget.

Howard Fischer:
It took this much blood to take the 1.2 out of the budget, and that's assuming that the sales tax passes on May 18th. You are running out of places to cut. Because -- oh, can't cut parks and corrections because, heaven forbid, people might have home arrests or something like that. You’re running out of places to cut. What services do you decide you no long he need entirely?

Ted Simons:
When do the cuts start? What time frame do we see here?

Mary K. Reinhart:
Kidscare effective June 15th. There's transitioning, the behavioral health services, they're beginning that work now. AHCCCS, that was due to be January 1st, may be extended to June 30th, depending on what congress does. First things first, it's on the ballot and that continues to proceed as is until we see the campaign heating up on both sides.

Ted Simons:
Last question on just the general look at the budget -- how much federal matching funnels have been lost -- these packages -- this package of bills, I should say, federal matching funded, how much is the state losing?

Mary K. Reinhart:
$2.5 billion roughly is the the AHCCCS rollback would cost. The kids care program, which is a three-to-one match, about $100 million in federal funding. The all-day K, $218 million in state funding that we haven't mentioned the full-day K program, that's another thing that again, schools are struggling with to figure out how to transition. But there was no federal funding associated with that.

Howard Fischer:
It doesn't matter if the feds were offering 95 cents on every dollar, if you can't afford the local match, it's irrelevant.

Ted Simons:
Why not spend two dollars to make three? His response, the governor's response, we don't have the two dollars.

Mary K. Reinhart:
Others may argue it's a question of priorities.

Ted Simons:
Response, Jim, as far as the budget is concerned. Democrats, obviously not pleased. Phony budget was used because so much was with the voter improvement.

Jim Small:
Phony budget, about the budget proposal. Obviously not happy. All voted against it. But they're in the minority. Weren't able to effect any change in it. Republicans were able to by and large keep the caucuses together on the budget proposal, which I think honestly was a little bit of a surprise to me. Usually you don't get a budget out with just about the entire caucus. They only have one or two bills that were like that knowledge.

Howard Fischer:
The problem that the Democrats have had; they want massive change in how state funding is approved. And they wonder why is nobody paying attention. Rather than going after discrete parts, for example, if you put on the floor of the house and force the Republicans to vote, should we tax doggy daycare. Which is currently exempt, and then you put the Republicans on the spot. Should we tax spa treatments? They don't want to do that. They want a massive change in the tax structure which is why they're the minority party.

Jim Small:
Part of the problem gets back to -- for as much as they said they within they want to be bipartisan and at the table on this, I mean, actions speak louder than words and they haven't taken steps to do that. The closest they came was adopting the budget that -- that third-party budget and got aired in the house appropriations committee. That was the closest to saying we really like this one. They had multiple opportunities, they were asked multiple times, give us a budget, put something out there so we can actually work and incorporate it.

Howard Fischer:
They don't want it. They figure if Jan fails, better chance for Terry. If they're making Jan's budget, which is where we started from, better, and we can get out of this without real blood, Jan's victorious.

Ted Simons:
Is that the general consensus as to -- the governor repeats yesterday, no comprehensive budget solution from the Democrats? First, is that true, and secondly, does that play?

Mary K. Reinhart:
Depends on your definition of comprehensive. They would argue they've submitted several comprehensive budgets between last January and today. Have they been in bill form? No, a couple here and there. The orphan budget as Jim referred to never made it into bill form and there's some disagreement why, and it came along after a deadline and it's really all about politics, Howard's got a point.

Ted Simons:
Last question on this aspect. “First things first” going to the voter, growing smarter, one cent temporary sales tax. Are there contingency plans?

Howard Fischer:
There's a contingency plan in the sales tax goes down. It includes cutting another 400-some million out of K12. $107 million out of universities which put us in violation of the federal stimulus agreement we signed. $110 million out of AHCCCS and nickels and dimes everywhere else. As to “first things first,” voters saying we want to keep it. Land trust, we want to keep it. And here's the other piece. The prop 204, the rollback, I think there's a good case to be said that it's illegal. You will fund this not on the with tobacco tax --

Howard Fischer:
I think it kind of tracks what people are thinking. I think the one thing that the governor has done well is to say, look, if this fails, it gets even worse. And now that there's a contingency budget, again, if, in fact, you're going to take $435 million out of K-12, people can recognize that. If you are going to cut universities, which is why the ASU foundation has put in money because they don't want universities to be cut. We've cut $2 billion since she became governor. How much more do we want to cut?

Ted Simons:
And as far as the sales tax and the poll is concerned, sounds like the yes campaign is going great guns as far as raising monies. What is happening to ax attacks?

Jim Small:
It's bringing Joe the Plumber to town. It's kind of a national celebrity and certainly the anti-tax movement, people identify with him. The campaign that the opposition is going to run is a shoestring campaign, a lot of grassroots work. They don't have a lot of financial backers and we saw in California last year, you can run in -- opposing a tax increase campaign on a small budget. They got outspent by a magnitude 10 to 15; if they're able to do targeted work you might be able to offset the million --

Howard Fischer:
You've got it right. The key is what we call earned media. The ability to bring in somebody, the TV cameras in and the three of us out to a press conference. High-profile people saying there's other alternatives. The problem is that John Mungers budget aside, we don't have alternatives. Terry Goddard, for all the talk, I don’t want this. Nothing else from him. Or Dean Martin or Buzz Mills. That's the problem. What's your alternative?

Mary K. Reinhart:
The key for the yes on 100 folks is it keep it low key. Like a bond override and hope that the large number of undecided voters that we saw in the polls remain undecided and stay home. It's going to have to be the motivated folks. I think the folks in the hinter lands don't know why we need a sales tax --

Ted Simons:
As far as Terry Goddard is coming out, he's saying, I can get on board with the one-cent sales tax if -- and if it involves a recovery act.

Jim Small:
I think that if involves that he's in a gubernatorial race against an incumbent governor and this was the campaign trying to get one over on them that -- certainly, a fair shot to take at her. From a political standpoint, but I don't know how serious it is -- he's still running against her and if she makes the Republican primary, trying to beat her.

Howard Fischer:
He knows the answer already. When she did her five-point plan a year ago, she said I want business tax cuts in 2012, which is what the Kirk Adams plan gives it. She's already on record. This was no risk for him. This way he can say, I offered to support the sales tax hike but you wouldn't sign off. Because he knows she won't.

Ted Simons:
It's a talking point. You're asking us to approve a one-cent sales tax, at the same time you're pushing through corporate tax breaks. Democrats have been talking about that for a while.

Mary K. Reinhart:
The governor doesn't have to take a position; I think it's going to be unlikely that house bill 2250 sees the end of the line here.

Jim Small:
I think Senator Burns assigned it to rules committee the other day and doing this as a way to signal we're serious about it. And he has concerns whether the tax cuts included in the bill, whether they're going to negatively affect the state's bottom line three, four, five years down the line. And so it may come out but may not look like it does now.

Howard Fischer:
The -- even the legislative budget staff said everything else being equal and I know they talk static and dynamic models, but by the time this is fully implemented, $940 million a year loss. Remember, the sales tax only brings in about $950 million a year for three years and then goes away and then we're going to give up $940 million a year forever. Speaker Adams, you have lower taxes and we'll bring in more economic development. At some point, the curve falls apart.

Mary K. Reinhart:
As a practical matter, I think they're on the road -- they've got a plan, want to be out of there by early May. Maybe it gets moving and then falls to the floor as many bills do.

Ted Simons:
Payday loads looks like it's adios here.

Howard Fischer:
Even the lawmakers who believed that the government shouldn't be telling people you're too stupid to know how much you're paying for a length. It's the same basic thing they rejected. 391% annual percentage rate interest. Certain safeguards against rollovers. $14 million spent. Is this the last gasp? You know, there's $150 million a year in fees that this industry collects just in Arizona, I think between now and the early may adjournment that Mary Kay is talking about, we'll see somebody trying to throw this out. I think its dead.

Ted Simons:
I think we're done. Thank you for joining us on "Horizon."